London higher as oils, mining shares gain

banks, builders under pressure; Thus Group soars after bid

By

SimonKennedy

LONDON (MarketWatch) -- U.K. shares ended higher Monday, as gains for the mining and oil sectors after another record high for crude prices helped offset some declines in banking and construction stocks as more weak data surfaced on housing and consumer confidence.

London's FTSE 100 index (UKX), weighted toward the oil and mining sectors, gained 1.74%, up 96 points to stand at 5,625.90 in the final session of the quarter. Other European markets were mixed after modest gains for Wall Street in early trading. See Europe Markets.

Commodity prices in London were higher across the board, with oil surging to a new all-time high in electronic trading of $143.67 before pulling back.

Shares of oil and gas heavyweights BP (BP) and Royal Dutch Shell (RDSA) rose by 3.2% and 2.4%, respectively, with BP also benefiting from an upgrade to hold from sell at Societe Generale on expectations of stronger earnings.

Rising commodities also boosted miners, with Rio Tinto (RIO) among the top gainers after a Financial Times report that Lakshmi Mittal, the main shareholder behind ArcelorMittal (MTP), is considering getting involved in the takeover battle for the group.

Lonmin (LMI), however, saw its shares fall 3% after the company was forced to shut down a furnace for a week following a leak.

Gary Pearson, an analyst at Deutsche Bank, said past history suggests the delay could be "somewhat longer" than the company has indicated. He added the shut down creates a risk the company will have to buy platinum on the open market to fulfill its contractual obligations.

Home builders struggle

The construction sector was also under pressure to start the week.

Shares of Taylor Wimpey (TW) ended flat after the home builder said it's in talks with shareholders to raise additional financing and expects to write down the value of its land bank and work in progress worldwide by some 660 million pounds.

The moves also came after data from Hometrack showed U.K. house prices dropped by 1% in June, falling for the ninth consecutive month. Consumer confidence also slipped near an all-time low amid a darkening economic outlook. See full story.

"This may be the first in a line of fund raising for the sector," said Simon Brown, an analyst at Landsbanki.

Brown added the "most obvious other candidate" is Barratt Developments and said if it does need cash, Barratt may make an announcement before its next trading update, scheduled for July 10.

Banking stocks were mostly in the red, with shares of Barclays (BARC) down 2.2% and Royal Bank of Scotland (RBS) down 1.3%.

Shares of Bradford & Bingley (BB), however, gained some 2%, stabilizing after they lost around a fifth of its value on Friday when Clive Cowdery's Resolution investment vehicle withdrew a rival funding plan.

In deal news, shares of Thus Group (THUS) jumped 21.9% to 177 pence. Cable & Wireless (CW) made a takeover bid valued at 180 pence a share and said it's already built its stake up to 29.9%.

Thus stopped short of recommending the deal, but analysts saw it as a good price that shareholders would be likely to accept. See full story.

Another small-cap moves was Trinity Mirror (TNI), which tumbled 28% in afternoon trading.

The newspaper publisher released an unscheduled trading update, warning on profit for the second half of the year and canceling the remainder of its share buyback program.

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